Northern States Financial Corporation Reports First Quarter Earnings

WAUKEGAN, IL--(Marketwired - May 5, 2015) - Northern States Financial Corporation (OTCQB: NSFC) (the "Company"), holding company for NorStates Bank (the "Bank"), an FDIC insured financial institution, today reported first quarter 2015 net income of $180,000 as compares with a loss of $677,000 for the same quarter of 2014. Per share book value at March 31, 2015 was $0.38.

The financial results of the Bank showed first quarter earnings of $269,000. The Bank made a provision of $100,000 to the allowance for loan and lease losses during the first quarter of 2015. Management believed as of March 31, 2015, the allowance for loan and lease losses was adequate at 2.8% of total loans.

Total assets for the Company were $432 million at March 31, 2015, an increase of 2.3% from year-end 2014. Loan volume was steady during the first quarter, despite some welcome payoffs. The Bank's first quarter net interest margin was 3.12% with the cost of funds of 0.12%. The Bank's leverage capital ratio was 9.95%. 

With regard to asset quality, the Company's non-performing assets ("NPAs"), consisting of nonaccrual loans, ninety days or more past due loans still accruing, loans considered troubled debt restructurings and other real estate owned, were reduced by $4.4 million from December 31, 2014 to March 31, 2015.

"The Bank continues to make significant progress with the disposition of and upgrades to its NPAs," stated Scott Yelvington, President and Chief Executive Officer. "We are also continuing our efforts to reduce expenses and increase income."

About Northern States Financial Corporation

Northern States Financial Corporation is the holding company for NorStates Bank, a full-service commercial bank with eight branches in Lake County, Illinois. NorStates Bank is the successor to financial institutions dating to 1919. NorStates Bank serves the populations of northeastern Illinois and southeastern Wisconsin.

Forward-Looking Information

This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include, but are not necessarily limited to, fluctuations in interest rates, inflation, government regulations, general economic conditions, competition within the business areas in which the Company conducts its operations including the real estate market in Illinois, and other factors beyond the Company's control. Such risks and uncertainties could cause actual results for subsequent interim periods or for the entire year to differ materially from those expressed or implied by any forward-looking statement. Readers should not place undue reliance on the forward-looking statements, which reflect management's beliefs, expectations and assumptions only as of the date hereof. The Company undertakes no obligation to update statements to reflect new information or subsequent events or circumstances.

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Key Performance Data
		March 31,			December 31,			September 30,			June 30,			March 31,
For quarter ended		2015			2014			2014			2014			2014
Net income (loss) available to common stockholders		$	180		$	(142	)	$	283		$	16,100		$	(677	)
Basic income (loss) per average outstanding share			0.00			(0.00	)		0.00			0.26			(0.16	)
Diluted income (loss) per average outstanding share			0.00			(0.00	)		0.00			0.26			(0.16	)
Return on average assets			0.17	%		-0.13	%		0.27	%		15.99	%		-0.70	%
Return on average equity			2.18	%		-1.75	%		3.50	%		237.95	%		-27.70	%
Yield on interest earning assets			3.21	%		3.39	%		3.10	%		3.13	%		3.05	%
Cost of interest-bearing liabilities			0.19	%		0.18	%		0.18	%		0.20	%		0.20	%
Net interest spread			3.02	%		3.21	%		2.92	%		2.93	%		2.85	%
Net interest margin			3.07	%		3.24	%		2.96	%		2.97	%		2.89	%
Net charged-off loans		$	488		$	1,866		$	163		$	641		$	(81	)
Net charged-off loans to average loans (annualized)			0.89	%		3.45	%		0.30	%		1.17	%		-0.15	%

		March 31,			December 31,			September 30,			June 30,			March 31,
		2015			2014			2014			2014			2014
Total stockholders' equity		$	33,112		$	32,333		$	32,060		$	32,016		$	9,336
Deferred tax asset			25,188			25,566			26,709			26,539			26,442
Deferred tax asset valuation allowance			(25,183	)		(25,183	)		(26,070	)		(26,053	)		(25,573	)
Book value per common share		$	0.38		$	0.37		$	0.37		$	0.17		$	(1.84	)
Common shares outstanding			87,604,088			87,604,088			87,604,088			87,604,088			4,270,755

			March 31,			December 31,			September 30,			June 30,			March 31,
			2015			2014			2014			2014			2014
Nonperforming assets
Loans on nonaccrual status			$	9,715		$	16,551		$	23,576		$	15,242		$	19,555
Loans 90 days or more past due, still accruing				298			1,048			610			283			566
Loan troubled debt restructurings				3,742			3,376			5,851			6,531			5,726
	Total nonperforming loans			13,755			20,975			30,037			22,056			25,847
Other real estate owned				19,347			16,514			18,933			19,012			13,673
	Total nonperforming assets		$	33,102		$	37,489		$	48,970		$	41,068		$	39,520
Nonperforming assets excluding trouble debt restructurings			$	29,360		$	34,113		$	43,119		$	34,537		$	33,794
Nonperforming loans to total assets excluding trouble debt				3.18	%		4.97	%		7.10	%		5.41	%		6.59	%
Nonperforming assets to total assets excluding trouble debt				7.66	%		8.88	%		11.57	%		10.07	%		10.07	%
Nonperforming assets excluding trouble debt restructurings to total assets				6.80	%		8.08	%		10.19	%		8.47	%		8.61	%

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Condensed Consolidated Balance Sheets				March 31,			December 31,			September 30,			June 30,			March 31,
				2015			2014			2014			2014			2014
Assets
Cash and due from banks				$	5,258		$	8,258		$	4,272		$	5,627		$	6,692
Interest bearing deposits in financial institutions - maturities less than 90 days					63,768			26,727			40,908			33,162			50,363
	Total cash and cash equivalents				69,026			34,985			45,180			38,789			57,055
Interest bearing deposits in financial institutions - maturities of 90 days or greater					7,739			8,483			9,971			8,483			8,483
Securities available for sale					101,659			121,368			117,447			116,363			91,217
Securities held to maturity					12,069			16,305			14,968			7,001			0
Loans and leases, net of deferred fees					217,270			219,049			213,031			215,307			219,059
Less: Allowance for loan and lease losses					(6,153	)		(6,541	)		(8,407	)		(8,570	)		(9,211	)
	Loans and leases, net				211,117			212,508			204,624			206,737			209,848
Federal Home Loan Bank stock					931			931			931			931			931
Office buildings and equipment, net					7,851			7,957			8,041			8,021			8,158
Other real estate owned					19,347			16,514			18,933			19,012			13,673
Accrued interest receivable					1,144			1,158			1,196			1,147			1,051
Other assets					986			1,814			1,931			1,435			1,960
	Total assets			$	431,869		$	422,023		$	423,222		$	407,919		$	392,376
Liabilities and Stockholders' Equity
Liabilities
Deposits
	Noninterest-bearing deposits			$	77,213		$	79,378		$	71,285		$	71,318		$	71,525
	Interest- bearing deposits				287,406			277,352			286,520			273,608			275,834
		Total deposits			364,619			356,730			357,805			344,926			347,359
Securities sold under repurchase agreements					18,231			18,447			20,100			16,601			14,929
Subordinated debentures					10,310			10,310			10,310			10,310			10,310
Advances from borrowers for taxes and insurance					2,639			1,485			445			1,328			1,970
Accrued interest payable and other liabilities					2,958			2,718			2,502			2,738			8,472
		Total liabilities			398,757			389,690			391,162			375,903			383,040
Stockholders' Equity
Common stock					878			878			878			878			1,789
Preferred stock					0			0			0			0			17,211
Warrants					0			0			0			0			681
Additional paid-in capital					32,088			32,088			32,088			32,088			7,326
(Accumulated deficit) retained earnings					4,751			4,571			4,713			4,430			(11,670	)
Treasury stock, at cost					(4,674	)		(4,674	)		(4,674	)		(4,674	)		(4,674	)
Accumulated other comprehensive income, net					69			(530	)		(945	)		(706	)		(1,327	)
	Total stockholders' equity				33,112			32,333			32,060			32,016			9,336
		Total liabilities and stockholders' equity		$	431,869		$	422,023		$	423,222		$	407,919		$	392,376
Common shares outstanding					87,604,088			87,604,088			87,604,088			87,604,088			4,270,755
Book value per common share				$	0.38		$	0.37		$	0.37		$	0.17		$	(1.84	)

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Condensed Consolidated Statements of Operations
For quarter ended					March 31,			December 31,			September 30,			June 30,			March 31,
					2015			2014			2014			2014			2014
Interest income
	Loans (including fee income)				$	2,484		$	2,625		$	2,319		$	2,427		$	2,484
	Securities
		Taxable				678			683			619			488			260
		Exempt from federal income tax				4			6			5			6			11
	Federal funds sold and other					36			40			36			44			38
			Total interest income			3,202			3,354			2,979			2,965			2,793
Interest expense
	Time deposits					71			66			63			66			67
	Other deposits					22			24			23			21			23
	Repurchase agreements and federal funds purchased					1			1			0			1			0
	Subordinated debentures					53			54			54			58			59
			Total interest expense			147			145			140			146			149
Net interest income						3,055			3,209			2,839			2,819			2,644
Provision for loan and lease losses						100			0			0			0			0
Net interest income after provision for loan and lease losses						2,955			3,209			2,839			2,819			2,644
Noninterest income
	Service fees on deposits					321			377			408			403			387
	Gain on sale of securities					122			16			0			0			78
	Net gain (loss) on sale of other real estate owned					0			(440	)		4			373			12
	Other operating income					385			400			438			434			385
			Total noninterest income			828			353			850			1,210			862
Noninterest expense
	Salaries and employee benefits					1,703			1,726			1,566			1,495			1,439
	Occupancy and equipment, net					597			492			537			477			639
	Data processing					330			679			528			451			478
	Legal					93			74			49			42			138
	FDIC insurance					141			135			131			205			222
	Audit and other professional					134			94			126			97			129
	Printing and supplies expense					60			49			40			43			33
	Write-down of other real estate owned					0			26			82			158			(7	)
	Other real estate owned expense					170			27			117			181			307
	Other operating expenses					375			402			230			513			426
			Total noninterest expense			3,603			3,704			3,406			3,662			3,804
Net income (loss) before income taxes						180			(142	)		283			367			(298	)
Income tax expense						0			0			0			0			0
Net income (loss)						180			(142	)		283			367			(298	)
	Discount on redemption of preferred stock					0			0			0			(15,883	)		0
	Dividends to preferred stockholders					0			0			0			150			366
	Accretion of discount on preferred stock					0			0			0			0			13
Net income (loss) available to common stockholders					$	180		$	(142	)	$	283		$	16,100		$	(677	)
Average common shares outstanding						87,604,088			87,604,088			87,604,088			61,047,312			4,270,755
Basic income (loss) per average outstanding share					$	0.00		$	(0.00	)	$	0.00		$	0.26		$	(0.16	)
Diluted income (loss) per average outstanding share					$	0.00		$	(0.00	)	$	0.00		$	0.26		$	(0.16	)

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
				March 31,			December 31,			September 30,			June 30,			March 31,
				2015			2014			2014			2014			2014
Loans
	Commercial			$	10,522		$	14,239		$	12,355		$	13,127		$	13,301
	Real estate-construction				11,636			11,600			12,300			12,333			18,737
	Real estate-mortgage 1-4 family				30,285			30,546			30,322			30,381			29,421
	Real estate-mortgage 5+ family				36,569			32,968			30,592			30,769			27,341
	Real estate-mortgage commercial				118,589			119,669			116,933			117,621			118,062
	Home equity				8,859			9,131			9,327			10,031			11,256
	Installment				1,021			1,069			1,380			1,230			1,111
	Deferred loan fees				(211	)		(173	)		(178	)		(185	)		(170	)
		Total loans		$	217,270		$	219,049		$	213,031		$	215,307		$	219,059
				March 31,			December 31,			September 30,			June 30,			March 31,
				2015			2014			2014			2014			2014
Deposits
	Demand - noninterest bearing			$	77,213		$	79,378		$	71,285		$	71,318		$	71,525
	Demand - interest bearing				57,158			61,313			66,673			62,287			62,100
	Money market accounts				49,453			51,046			52,935			51,220			49,687
	Savings				80,654			77,789			77,651			77,092			78,229
	Time, $100,000 and over				49,655			37,483			38,517			31,202			32,627
	Time, under $100,000				48,236			49,471			50,494			51,807			53,191
	Time, brokered				2,250			250			250			0			0
		Total deposits		$	364,619		$	356,730		$	357,805		$	344,926		$	347,359

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)

			1Q 2015						4Q 2014						31Q 2014						2Q 2014						1Q 2014
			Average			Yield/			Average			Yield/			Average			Yield/			Average			Yield/			Average			Yield/
			balance			Rate			balance			Rate			balance			Rate			balance			Rate			balance			Rate
Earning assets
	Loans		$	219,900		4.54	%		$	216,345		4.88	%		$	214,261		4.36	%		$	218,419		4.47	%		$	221,047		4.53	%
	Securities taxable			129,337		2.10				138,741		1.96				128,029		1.92				108,473		1.77				91,929		1.10
	Securities tax-exempt			437		6.41				575		6.30				561		5.68				560		6.36				1,096		6.32
	Interest-bearing deposits			50,803		0.28				42,000		0.38				42,558		0.34				52,801		0.33				52,685		0.29
	Total earning assets			400,477		3.21	%			397,661		3.39	%			385,409		3.10	%			380,253		3.13	%			366,757		3.05	%
Non interest earning assets				28,670						29,935						27,115						22,543						22,819
Total assets			$	429,147					$	427,596					$	412,524					$	402,796					$	389,576
Interest-bearing liabilities
	Interest-bearing demand deposits		$	58,445		0.10	%		$	67,480		0.09	%		$	63,434		0.09	%		$	62,418		0.08	%		$	61,732		0.10	%
	Money market deposits			50,104		0.05				51,977		0.05				52,223		0.05				49,747		0.05				50,313		0.05
	Savings deposits			78,445		0.01				77,339		0.10				77,733		0.01				77,795		0.01				75,817		0.01
	Time deposits			94,548		0.30				87,923		0.30				81,835		0.31				84,621		0.31				86,465		0.31
	Other borrowings			30,660		0.70				30,328		0.73				27,780		0.78				24,865		0.95				25,499		0.93
	Total interest-bearing liabilities			312,202		0.19	%			315,047		0.18	%			303,005		0.18	%			299,446		0.20	%			299,826		0.20	%
Demand deposits				76,962						76,528						73,580						70,776						70,132
Other liabilities				4,950						3,567						3,619						5,509						9,841
Stockholders' equity				33,033						32,454						32,320						27,065						9,777
Total liabilities and stockholders' equity			$	427,147					$	427,596					$	412,524					$	402,796					$	389,576
Net interest spread						3.02	%					3.21	%					2.92	%					2.93	%					2.85	%
Net interest margin						3.07	%					3.24	%					2.96	%					2.97	%					2.89	%